Hi, being invested in the market means a need to stomach some kind of volatility right? What do you reckon is a good mindset and/or strategy to sit through a downturn like this? Or, concretely, how do you manage your own portfolio? Thank you.
-FY
Reader FY commented in my previous post.
It's a worthy question.
The thing is... I haven't written much or thought much about this cos... well, I don't think it's a big deal.
But... it is a big deal for a lot of people and I should write about it.
For me, I've watched the markets crash in 1998 during the Asian financial crisis.
2008, the Global Financial crisis.
2019, COVID crisis.
They all recovered. So for me, it's pretty much been there, done that.
Of course it's no fun looking at my portfolio which is down maybe 15-20% or maybe even 40%.
But life goes on. Depending on the type of investments invested in.
Some investments won't ever recover. Some will.
What was your intention when you made those investments?
What were the principles behind that investment?
If you buy good companies which provide good services to people, the companies will generally survive downturns and recover.
Whether they do better or worse than the general market or benchmark is a different matter.
During good times, people post how good their investments do vs their benchmarks.
During bad times, people are just hoping that their investments stay solvent, and can recover.
Good stable companies will most likely recover and continue to do well and continue to provide services 10-20-30 years down the road.
And my own portfolio is pretty much structured in this way.
Of course still no fun looking at a reduced portfolio size.
I've put my money in (what I feel) are long term stocks. If I look at a 10 year, 20 year horizon, the next 6 months or 1 year... it's just a blip. I just don't read so much financial news, go out as per normal, I don't lose any sleep over it.
If you/I read the doom and gloom news, I read it once last week, stress, read it again the next day, stress, then the following day, stress...
There's no end of doom and gloom news. That's how the financial world works. For the whole down period, there will be bad news and "world coming to an end" articles every single day.
But in a long horizon, it's just 1 chapter in a 20-30 chapter book.
I liken investments to starting a BBQ fire.
A lot of people don't know how to start a fire at the BBQ pit.
A lot of people that I've seen... they put the starter, add the charcoal, light the starter, then fan it too early, then blow out the fire.
When actually, starting a BBQ fire is really easy.
Put the starter, stack the charcoal well, light the starter, and walk away and do other things.
The charcoal will take time to heat up, let time pass. Go and do other things, like prep the food, talk to friends, whatever. When the time is ready, then scatter the red hot charcoal and fan it and watch it burst into flames.
Assuming that you've stacked the charcoal well and placed the starter in the right places...
So during this time of downturn...
Just... go do something else and let the starter and charcoal heat up.
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